Monday, November 23, 2015

Like Uber, but for usury

Some of the letters we received over the last few years. Several pre-approved credit card offers from American Express. A pre-approved loan of up to $25,000 from Harmoney. Two offers to upgrade to a platinum credit card from The National Bank (now ANZ). A letter informing us that our monthly credit card limit had been increased overnight by $27,000, if we would only phone to confirm. Then there was that time they sent me a replacement Air New Zealand airpoints card in the mail and it had magically mutated into a MasterCard platinum credit/debit card with PayWave technology, just waiting for my say-so to be activated.

The services that you didn’t even ask for and that come into your home: those are the creepiest tendrils of capitalism.

What most of these letters have in common is the promise of access to wealth, as opposed to debt servitude. In some cases – American Express, the National Bank’s platinum card – the offers have a whiff of old money about them: white-gloved waiting staff opening doors for you, perhaps on the way to a classical concert where you will mix it up with other high-class people. Nothing about our postcode or our finances would counsel these assumptions, but I’m sure the marketers know what they’re doing, and that pushing certain buttons works on folk like us.

The other approach is selling the aspiration without actually pretending that you do have access to the funds. Harmoney has the best line here. The offer of a pre-approved loan* they mailed to us in February of this year contained a list of helpful suggestions for things we might want to buy even though evidently we couldn’t afford them. It ran like this.

Only at the bottom did the company venture to suggest a more reasonable use for the loan, namely the consolidation of existing debt at a (possibly, hopefully) lower interest rate.

Elegantly, the asterisk in the Harmoney letter stands for – and I paraphrase – ‘this loan is not actually pre-approved’. Here’s the exact weasel wording.
This pre-approval is indicative for purposes of borrowing money through Harmoney. It is based on the information available to us at the time this letter was sent. The result when you register as a borrower to use the Harmoney service may be different to that which is provided here. In providing you with a pre-approval Harmoney does not represent that you will be successful in borrowing money through the Harmoney service.
But note the final sentence:
If successful and you apply in full, you could have money in your account within 2 working days.

We only have to walk down the road to the Newtown shops to find the brick and mortar equivalents of Harmoney’s ‘service’: companies like Aztec, Geneva and Instant Finance, where people who wouldn’t qualify for a credit card or a personal loan at a regular bank can go to get money quickly to get out of a jam. Hence the 2 working days promise: nobody needs a swimming pool or a campervan holiday quite that urgently. It’s when you have wolves at the door that you need the ready cash.

There were protests outside our local branch of Instant Finance some years back, targeting the role of rugby league star Stacey Jones in promoting the loans among the Pasifika community. But even these companies seem to have a certain reassuring presence – you can at least point to the buildings – compared to the online lenders, which a new law passed last year struggles to control.

Like online gambling, online instant finance is often presented as an exciting opportunity.

In one of my favourite images, from a US payday loan site, the money reaches into your home directly through the computer screen.

Breaking with the genre, Harmoney makes an appeal to family and offers two options: to borrow or to invest (that is to say, lend).

For Harmoney is a peer-to-peer lending platform, the first of its kind to have been licensed in New Zealand. Now peer-to-peer has to be the most spectacular misnomer in the history of language, given that by the very definition of the service the money goes from those who have it to those who don’t; not to mention the fact that the $100 million seeding money for the operation came from just four investors, who I strongly suspect will remain peerless. But TradeMe has a stake, and the press has been positive, and so we’ll have to regard the fact that they hawked their loans to us via the suggestion we borrow up to $25,000 to treat ourselves to a swimming pool as business as usual, that is to say, the free market doing what it does best. All we have to do is find a ‘peer’ willing to lend the money to us. Everything going well, it will be ours within two working days.

Spiralling levels of household debt – hidden inside fantastically opaque financial products – were among the causes of the Global Financial Crisis, so there is something especially lurid about the cheerfulness with which these products are promoted, so soon. But then the vision offered by the marketing brochures is not so much one of living beyond our means as independently of them: as if money will never matter again. A platinum credit card will ensure the hand that opens your door wears a white glove. A lavish holiday can be afforded now, paid for at a future time that is increasingly uncertain.

Soon there might be an app uncoupling us from the financial system altogether. Like Uber, but for usury, allowing us to lend and borrow freely, and become the loan shark of one another. There might as well be.